The leading banks need to improve their customer service, maximize their security, minimize complexity and add value beyond payments if they want to survive and thrive, according to a new report by Boston Consulting Group (BCG).
According to the report, which is the14th annual study of the global payments business, the leading banks have to change because of the increased competition from startups and FinTechs.
“It’s critical for incumbent banks to map out diverse scenarios with some key questions in mind,” said Stefan Dab, a co-author of the report and the global leader of BCG’s transaction banking segment, in a press release announcing the new research. “How will payments behavior change over the next decade? How will control of customer engagement and brand image diminish as the Internet of Things evolves, as so-called open banking grows and as commercial clients interface with more third-party providers? Banks must also foster a culture of innovation and resolve tough dilemmas, such as whether or not to collaborate with FinTechs that can become competitors.”
According to the report, payments industry revenues hit $1.1 trillion in 2015, representing 29 percent of global banking revenues. By 2025, they are projected to reach nearly $2 trillion, a compound annual growth rate of 6 percent. The growth drivers will be transaction-related revenues and account revenues. The report noted that a confluence of forces is reshaping the payments industry and that three forces in particular will continue to influence the pace and path of transformation: technological advances, shifting customer expectations and behavior and regulatory initiatives. The report noted that, while the startups and those that are disrupting the market will keep the big banks on their toes, it’s not a guarantee that they will succeed granted the banks up their game.